That at the end of any war in which the United States may become involved the Army shall be reduced to a peace basis by the transfer in the same arm of the service or absorption by promotion or honorable discharge, under such regulations as the Secretary of War may establish, of supernumerary commissioned officers and the honorable discharge or transfer of supernumerary enlisted men; and nothing contained in this act shall be construed as authorizing the permanent increase of the commissioned or enlisted force of the Regular Army beyond that now provided by the law in force prior to the passage of this act, except as to the increase of twenty-five majors provided for in section I hereof.
The importance of legislation for the permanent increase of the Army is therefore manifest, and the recommendation of the Secretary of War for that purpose has my unqualified approval. There can be no question that at this time, and probably for some time in the future, 100,000 men will be none too many to meet the necessities of the situation. At all events, whether that number shall be required permanently or not, the power should be given to the President to enlist that force if in his discretion it should be necessary; and the further discretion should be given him to recruit for the Army within the above limit from the inhabitants of the islands with the government of which we are charged. It is my purpose to muster out the entire Volunteer Army as soon as the Congress shall provide for the increase of the regular establishment. This will be only an act of justice and will be much appreciated by the brave men who left their homes and employments to help the country in its emergency.
In my last annual message I stated:
The Union Pacific Railway, main line, was sold under the decree of the United States court for the district of Nebraska on the 1st and 2d of November of this year. The amount due the Government consisted of the principal of the subsidy bonds, $27,236,512, and the accrued interest thereon, $31,211,711.75, making the total indebtedness $58,448,223.75. The bid at the sale covered the first-mortgage lien and the entire mortgage claim of the Government, principal and interest.
This left the Kansas Pacific case unconcluded. By a decree of the court in that case an upset price for the property was fixed at a sum which would yield to the Government only $2,500,000 upon its lien. The sale, at the instance of the Government, was postponed first to December 15, 1897, and later, upon the application of the United States, was postponed to the 16th day of February, 1898.
Having satisfied myself that the interests of the Government required that an effort should be made to obtain a larger sum, I directed the Secretary of the Treasury, under the act passed March 3, 1887, to pay out of the Treasury to the persons entitled to receive the same the amounts due upon all prior mortgages upon the Eastern and Middle divisions of said railroad out of any money in the Treasury not otherwise appropriated, whereupon the Attorney-General prepared a petition to be presented to the court, offering to redeem said prior liens in such manner as the court might direct, and praying that thereupon the United States might be held to be subrogated to all the rights of said prior lien holders and that a receiver might be appointed to take possession of the mortgaged premises and maintain and operate the same until the court or Congress otherwise directed. Thereupon the reorganization committee agreed that if said petition was withdrawn and the sale allowed to proceed on the 16th of February, 1898, they would bid a sum at the sale which would realize to the Government the entire principal of its debt, $6,303,000.
Believing that no better price could be obtained and appreciating the difficulties under which the Government would labor if it should become the purchaser of the road at the sale, in the absence of any authority by Congress to take charge of and operate the road I directed that upon the guaranty of a minimum bid which should give the Government the principal of its debt the sale should proceed. By this transaction the Government secured an advance of $3,803,000 over and above the sum which the court had fixed as the upset price, and which the reorganization committee had declared was the maximum which they would pay for the property.
It is a gratifying fact that the result of these proceedings against the Union Pacific system and the Kansas Pacific line is that the Government has received on account of its subsidy claim the sum of $64,751,223.75, an increase of $18,997,163.76 over the sum which the reorganization committee originally agreed to bid for the joint property, the Government receiving its whole claim, principal and interest, on the Union Pacific, and the principal of its debt on the Kansas Pacific Railroad.
Steps had been taken to foreclose the Government's lien upon the Central Pacific Railroad Company, but before action was commenced Congress passed an act, approved July 7, 1898, creating a commission consisting of the Secretary of the Treasury, the Attorney-General, and the Secretary of the Interior, and their successors in office, with full power to settle the indebtedness to the Government growing out of the issue of bonds in aid of the construction of the Central Pacific and Western Pacific bond-aided railroads, subject to the approval of the President.
No report has yet been made to me by the commission thus created. Whatever action is had looking to a settlement of the indebtedness in accordance with the act referred to will be duly submitted to the Congress.